Asian stocks decline after global markets fall on Italian turmoil

FAN Editor

Asian markets declined on Wednesday as a sell-off in U.S. and European markets weighed on sentiment during the Asian trading session. The political crisis in Italy took center stage, with investors concerned over its implications for the rest of the euro zone.

The Nikkei 225 fell 1.76 percent in Tokyo, with the banking and non-ferrous metals sectors leading losses in the morning. The broader Topix was down 1.62 percent as all of its 33 subindexes traded lower.

Seoul and Sydney registered slightly more measured declines in the early going. The Kospi slid 1.16 percent, with heavyweights like Samsung Electronics and Posco losing 1.17 percent and 2.72 percent, respectively. Meanwhile, the S&P/ASX 200 edged down by 0.8 percent, with the financials subindex leading the move lower.

MSCI’s broad index of shares in Asia Pacific excluding Japan eased 0.51 percent in Asia morning trade.

U.S. stocks sold off on Tuesday amid a political crisis in Italy and as investors digested trade negotiations between the U.S. and China, with the Dow Jones industrial average sliding 1.58 percent, or 391.64 points, to close at 24,361.45.

The losses seen on Tuesday marked the worst daily performance for both the Dow and S&P 500 since April 24. Both stock indexes were also down for the third consecutive session.

That followed weakness in European markets in the last session, with the pan-European Stoxx 600 ending down 1.37 percent. In Italy, the FTSE MIB tumbled 2.65 percent amid ongoing political turmoil which is expected to lead to a fresh vote in the months ahead.

Italy has been without a government since an inconclusive vote in early March, with anti-establishment political groups abandoning efforts to form a coalition over the weekend amid a dispute with the country’s head of state.

“The League/Five Star is already turning the election into an anti-establishment/anti euro one and that’s what the market has in its sights,” David de Garis, director of economics at National Australia Bank, said in a morning note.

The euro traded at $1.1536 at 8:03 a.m. HK/SIN, which was below the $1.16 level seen in the previous session. The dollar index, which tracks the dollar against several major currencies, stood at 94.849.

Italian bond yields rose, with the two-year yield rising more than 180 basis points, in the last session as investors sold Italian bonds. The 10-year U.S. Treasury yield slipped below the 2.8 percent level as investors turned to safe-haven assets. Bond prices move inversely to yields.

Other safe-haven plays also firmed overnight, with the Japanese yen steady at 108.56 to the dollar at 8:09 a.m. HK/SIN.

After what seemed like a cooling in tensions between the U.S. and China over bilateral trade issues, the White House on Tuesday said it was moving ahead with plans to subject around $50 billion in Chinese imports to tariffs.

On the commodities front, U.S. West Texas Intermediate crude futures added 0.19 percent to trade at $66.86 per barrel after settling 1.7 percent lower on Tuesday. Brent crude futures were flat at $75.39. Oil prices have been on the back foot following news last week that Saudi Arabia and Russia had discussed raising output.

Here’s the economic calendar for Wednesday (all times in HK/SIN):

  • 9:30 a.m.: Australia building approvals
  • 1:00 p.m.: Japan consumer confidence

Also of note, Indonesia’s central bank will meet on Wednesday after seeing little success with recent attempts to prop up the Indonesian rupiah. Most analysts polled by Reuters expect Bank Indonesia to raise its main rate by 25 basis points.

— CNBC’s Sam Meredith contributed to this report.

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